Enterprise Value (EV) to EBITDA
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- Enterprise Value (EV) = the total market value (MV) of the firm.
EV = MV of debt + MV preferred equity + MV common equity - Cash and investments
Cash and investments are netted out because these items reduce the net cost of purchasing the company.
- Enterprise value is a commonly used valuation perspective in M&A and investment banking transaction analysis.
- EBITDA = earnings before interest, taxes, depreciation and amortization
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